Paytm launches Payments Bank, offers 4 per cent interest rate on savings account; how does it work

Paytm launches Payments Bank, offers 4 per cent interest rate on savings account; how does it work

Under the payments bank licence, Paytm wallet users will be transferred to Paytm Payments Bank unless the user notifies otherwise. The amount can be transferred to his/her bank account after the user provides the name of the account holder, account number and IFSC code.

Paytm Payments Bank commenced its operations from Tuesday. It was launched after it secured an approval from Reserve Bank of India last week. The payment bank will offer cashbacks on deposits and zero fee on online transactions. Its parent company One97 Communications plans to invest Rs 400 cr initially. The company has a backing from Chinese firm Alibaba and Japanese conglomerate SoftBank. After Airtel and India Post, Paytm is third entity in the country to launch a payments bank.

Under the payments bank licence, Paytm wallet users will be transferred to Paytm Payments Bank unless the user notifies otherwise. The amount can be transferred to his/her bank account after the user provides the name of the account holder, account number and IFSC code.

The account for Paytm Payments Bank will initially be available on an invite-only basis. In the first phase, the company will roll out its beta banking app for its employees and associates. Paytm customers can request an invite through the Paytm Payments Bank website or the Paytm application on Apple’s iOS platform. The company said this will be a mobile-first product with first-of-its- kind feature of cashback on deposits. Every customer, to open a Payments Bank account, will get a cashback of Rs 250 as soon they bring deposits of a total of Rs 25,000 in their bank account. Users will continue to be able to use their Paytm Wallet in the same manner as before, it added.

The company at present has around 220 customers who use its digital wallet. The wallets will be shifted to the payments banks and users will have to comply with ‘know your customer’ (KYC) norms for opening accounts. For KYC, the company is setting up centres across India to assist its customers in opening accounts.

The account will have zero balance requirement and every online transaction (such as IMPS, NEFT, RTGS) will be free of charge. The company would offer an interest of 4 per cent per annum for savings accounts. The company will also offer current accounts to its millions of merchants.

The company also plans to roll out 31 branches and 3,000 customer service points of the bank in the first year. Paytm will offer virtual Rupay debit cards to customers immediately and physical card on request for withdrawing cash from any ATM in the country.

Last week while announcing the approval from payment bank, the company said it has appointed Renu Satti as the CEO of Paytm Payments Bank. “As per the directions of the RBI, the company will be transferring its wallet business to the newly incorporated payments bank entity, Paytm Payments Bank, under a payment bank licence awarded to a resident Indian, Vijay Shekhar Sharma,” the company said.

“RBI has given us an opportunity to create a new kind of banking model in the world. We are proud that our customer deposits will be safely invested in government bonds, and be used for nation building. None of our deposits will be converted into risky assets,” Vijay Shekhar Sharma said in a statement.

Paytm Payments Bank was registered in August 2016 as a subsidiary of One97 Communications with Sharma holding a 51% stake in the company. For the first five years, the stake of the promoter in payments banks should be at least 40%, according to the RBI guidelines.

According to the RBI’s guidelines, payments banks can accept deposits of up to Rs 1 lakh from each individual customers and issue services such as ATM cards, net banking and non-risk financial products such as mutual fund and insurance. Payments banks, however, are not eligible to offer loans or credit cards.